Despite seemingly complacent claims that the worst of the eurozone crisis was over, Standard & Poor’s has downgraded the European Union’s credit rating one notch from AAA to AA+. The ratings agency cited the fragile EU budget position and the lack of cohesion, and solidarity, across member states as a major credit risk.

European Commission vice-president Olli Rehn pointed to the S&P’s improved EU economic outlook, which was upgraded from ‘negative’ to ‘stable’, and underlined that “the EU rating with the two other major rating agencies, Fitch and Moody’s, was AAA”.

He added: “The commission’s view is that the EU credit rating should be essentially assessed on its own merits, due to the special treaty-based status of the EU budget – without deficit or debt, the very strong budget revenues from EU own resources and the treaty obligation from the 28 member states to always balance the EU budget.

“The commission disagrees with S&P that member state obligations to the budget in a stress scenario are questionable. All member states have always – and also throughout the financial crisis – provided their expected contributions to the budget in full and in time.”

But a spokesman for S&P countered: “In our view, EU budgetary negotiations have become more contentious – signalling what we consider to be rising risks to the support of the EU from some member states.

“In our opinion, the overall creditworthiness of the now 28 EU member states has declined. The stable outlook reflects our view that the capacity and willingness of highly rated member states offsets the risks at a AA+ level. We believe the financial profile of the EU has deteriorated and that cohesion among EU members has lessened.”

Back In January 2012, the ratings agency lowered the EU’s economic outlook to ‘negative’. Since that time, the average credit rating among the 28 member states had decreased to AA; whereas prior to January 2012, it was was AA+. At the end of November last year, the Netherlands lost its AAA rating, meaning only six EU nations retained the highest possible credit rating.

Dean Carroll is editor of Policy Review. Follow him on Twitter @poljourno